Provident New York Bancorp Announces Second Quarter 2013 Earnings of $0.15 per Diluted Share
Marketwired

Provident New York Bancorp (NYSE: PBNY), the parent company of Provident Bank, today announced second quarter results for the period ended March 31, 2013. Net income for the quarter was $6.5 million, or $0.15 per diluted share, compared to net income of $5.7 million, or $0.15 per diluted share for the same quarter last year; and $7.0 million, or $0.16 per diluted share for the linked quarter ended December 31, 2012.

President's Comments Jack Kopnisky, President and CEO, commented: "We had a solid second quarter. Earnings for the quarter were $6.5 million, a 15% increase compared to the second quarter of 2012. Earnings declined $491 thousand or $0.01 per share compared to the linked quarter, which was mainly the result of merger-related expense and an increase in foreclosed property expense as we continue to reduce non-performing assets.

We continue to focus primarily on serving small-to-middle market clients through a differentiated, team-based distribution strategy. Our pipelines of loans, deposits and fee income opportunities continue to be strong, which is allowing us to diversify our balance sheet and revenue streams and maintain strong momentum in our new and legacy markets.

Our credit quality improved again in the second quarter. Non-performing loans of $31 million at March 31, 2013 decreased $2.3 million compared to the linked quarter. Our ratio of non-performing loans to total loans declined by 147 basis points to 1.42% at March 31, 2013 as compared to the year ago period. Our allowance for loan losses to non-performing loans increased to 88% at March 31, 2013, and the positive trend in the risk ratings of our loan portfolio continued as well.

Our capital and liquidity position remain strong. Our Tier 1 leverage ratio was approximately 8.6% at Provident Bank and our consolidated tangible equity to tangible assets ratio was 9.2%.

We are looking forward to our pending merger with Sterling Bancorp (NYSE: STL), which we announced on April 4, 2013. This merger presents a tremendous opportunity to continue building a high performing institution and is a significant step in our strategy of expanding within the greater New York metropolitan area. We expect the merger will create a larger, more diversified company and will allow us to accelerate the build-out of our differentiated strategy targeting small-to-middle market commercial and consumer clients. The combined business will be a more effective competitor in the marketplace than either company on its own. Sterling Bancorp's established record of growth and profitability will be additive to Provident's growth strategy as we provide continued value for shareholders of both organizations."

Key Highlights for the Quarter

Net Interest Income and Margin Second quarter fiscal 2013 compared with second quarter fiscal 2012 Net interest income was $27.8 million for the second quarter of fiscal 2013, up $3.9 million compared to the second quarter of fiscal 2012 due to higher average loan volumes. Reflecting the current interest rate environment, the tax-equivalent yield on investments decreased 49 basis points and yield on loans declined 10 basis points compared to the second quarter of fiscal 2012. As a result, the yield on interest-earning assets declined 26 basis points to 3.96% on a tax equivalent basis for the second quarter of fiscal 2013. The cost of deposits increased one basis point to 22 basis points from the year ago quarter, while the cost of borrowings decreased three basis points to 3.49%. The resulting net interest margin on a tax-equivalent basis was 3.41% for the second quarter of fiscal 2013 compared to 3.57% for the same period a year ago.

Second quarter fiscal 2013 compared with linked quarter ended December 31, 2012 Net interest income for the quarter ended March 31, 2013 declined $104 thousand to $27.8 million, compared to $27.9 million for the linked quarter ended December 31, 2012. This was primarily due to two fewer days in the second fiscal quarter. The tax-equivalent net interest margin increased to 3.41% from 3.37% in the linked quarter, which was principally the result of a decline in our average interest bearing cash balance of $37.0 million. Yield on loans decreased 11 basis points and was 4.93%. Yield on interest earning assets declined two basis points to 3.96% from 3.98% in the linked quarter. Deposit costs decreased by six basis points, as certain deposit relationships were re-priced to current market rates and the maturity of higher cost deposits matured.

Non-interest Income Second quarter fiscal 2013 compared with second quarter fiscal 2012 Non-interest income declined $1.1 million to $6.9 million for the second quarter of fiscal 2013 compared with the second quarter of fiscal 2012. The decrease was mainly due to lower net gain on sale of securities of $670 thousand, and a decrease in title insurance fees and other management fees of $643 thousand. We sold the assets of our former subsidiaries that were active in title insurance and investment management businesses. During the second quarter of fiscal 2013 we reinvested in a new title insurance joint venture and deployed a new wealth management strategy. We expect both of these initiatives will contribute to non-interest income going forward.

Second quarter fiscal 2013 compared with linked quarter ended December 31, 2012 Non-interest income decreased $807 thousand to $6.9 million for the second fiscal quarter of 2013 compared to the linked quarter ended December 31, 2012. Title insurance fees and other management fees declined by $542 thousand, gain on sale of loans declined $239 thousand, and other non-interest income declined $798 thousand. Partially offsetting these declines was an increase in net gain on sale of securities of $813 thousand.

Non-interest Expense Second quarter fiscal 2013 compared with second quarter fiscal 2012 Non-interest expense increased $2.0 million to $23.3 million relative to the second quarter of fiscal 2012. This is the result of an increase in personnel expense associated with the continued growth in the number of our commercial banking teams and related occupancy expense. Foreclosed property expense increased to $915 thousand from $412 thousand over the same period a year ago.

Second quarter fiscal 2013 compared with the linked quarter ended December 31, 2012 Non-interest expense increased $793 thousand compared to the linked quarter. The increase was mainly related to $542 thousand in merger-related expense associated with our pending merger with Sterling Bancorp, as well as an increase in foreclosed property expense of $630 thousand. These increases were partially offset by lower compensation and benefits expense and professional fees expense.

Income Taxes In the second quarter of fiscal 2013, the Company recorded income tax expense at 25.2% compared to an estimated effective tax rate of 30.4% in the linked quarter and 26.3% for the same period in fiscal 2012. The decrease in the estimated effective tax rate is the result of an increase in the current and anticipated merger-related expense as well as the proportion of tax-exempt earnings as a percentage of total earnings.

Credit Quality Non-performing loans decreased to $31.3 million at March 31, 2013 compared to $39.8 million at September 30, 2012. During the first half of the fiscal year we exited several large credit relationships, which contributed to the decline. Net charge-offs for the second quarter were $3.2 million compared to $3.1 million in the linked quarter. The allowance for loan losses at March 31, 2013 was $27.5 million, which represented 88.1% of non-performing loans and 1.25% of our total loan portfolio. This compares to the linked quarter, in which the allowance for loan losses was $28.1 million, which represented 83.8% of non-performing loans and 1.28% of our total loan portfolio. The allowance for loan losses to total loans, excluding loans acquired in the Gotham transaction that were recorded at fair value at the acquisition date and continue to carry no allowance was 1.36% and 1.41%, at March 31, 2013 and December 31, 2012, respectively. Please refer to the Company's reconciliation of this non-GAAP measure on page 10.

During the quarter, the balance of foreclosed properties decreased $1.6 million to $5.5 million, the result of the sale of four properties. During the second quarter we acquired four properties with a balance of $602 thousand, and we incurred $606 thousand of foreclosed property write downs.

Subsequent to March 31, 2013, we exited an additional non-performing relationship with a loan a balance of $3.1 million at our carrying value.

Key Balance Sheet Changes

Capital and Liquidity Provident Bank remained well capitalized at March 31, 2013with a Tier 1 leverage ratio of 8.62% based on period end assets. Stockholders' equity increased $3.6 million from September 30, 2012, to $494.7 million at March 31, 2013. Tangible book value per share increased by $0.07 to $7.33 at March 31, 2013 from $7.26 at September 30, 2012, due to retained earnings. For the quarter ended March 31, 2013, the weighted average common shares outstanding increased to 43.7 million and 43.8 million, basic shares and diluted shares, respectively, compared to 41.1 million basic and diluted shares for the quarter ended September 30, 2012.

About Provident New York Bancorp Headquartered in Montebello, N.Y. Provident New York Bancorp is the holding company for Provident Bank, a growing financial services firm with $3.7 billion in assets that specializes in the delivery of service and solutions to business owners, their families, and consumers in communities within the greater New York City area through teams of dedicated and experienced relationship managers. Provident Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Provident Bank web site at www.providentbanking.com.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS In addition to historical information, this earnings release may contain forward-looking statements for purposes of applicable securities laws. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties. There are a number of important factors described in documents previously filed by the Company with the Securities and Exchange Commission, and other factors that could cause the Company's actual results to differ materially from those contemplated by such forward-looking statements. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements which may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. In addition to factors previously disclosed in reports filed with the Securities and Exchange Commission, the following factors, among others, could cause actual results to differ materially from forward-looking statements: changes in market interest rates and general and regional economic conditions; changes in government regulations and regulatory oversight; changes in the value of goodwill and intangible assets; changes in the quality or composition of the loan and investment portfolios; potential breaches of information security; competition from banks and non-banking companies; ability to obtain regulatory approvals and meet other closing conditions to the merger (the "Merger") between Provident New York Bancorp ("Provident") and Sterling Bancorp ("Sterling), including approval by Provident and Sterling shareholders, on the expected terms and schedule; delay in closing the Merger; difficulties and delays in integrating the Provident and Sterling businesses or fully realizing cost savings and other benefits; business disruption following the proposed Merger; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; changes in Provident's stock price before the completion of the Merger, including as a result of the financial performance of Sterling prior to closing; the reaction to the Merger of the companies' customers, employees and counterparties; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms. These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. Actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

Additional Information for Stockholders In connection with the proposed merger, Provident will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a joint proxy statement of Provident and Sterling and a prospectus of Provident, as well as other relevant documents concerning the proposed transaction. Provident and Sterling will mail the joint proxy statement/prospectus to their stockholders. STOCKHOLDERS OF PROVIDENT AND STERLING ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the proxy statement/prospectus (when available) and other filings containing information about Provident and Sterling at the SEC's website at www.sec.gov. The joint proxy statement/prospectus (when available) and the other filings may also be obtained free of charge at Provident's website at www.providentbanking.com under the tab "Investor Relations," and then under the heading "SEC Filings" or at Sterling's website at www.snb.com under the tab "Investor Relations," and then under the heading "SEC Filings."

Provident, Sterling and certain of their respective directors and executive officers, under the SEC's rules, may be deemed to be participants in the solicitation of proxies of Provident's and Sterling's shareholders in connection with the proposed merger. Information about the directors and executive officers of Provident and their ownership of Provident common stock is set forth in the proxy statement for Provident's 2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on January 10, 2013. Information about the directors and executive officers of Sterling and their ownership of Sterling common stock is set forth in the proxy statement for Sterling's 2012 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on April 3, 2012. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

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